US inflation data will cause "chaos" 5 things to know about Bitcoin this week

As Bitcoin prices struggled, a strong combination of data such as CPI made the week problematic.

Bitcoin started the new week in a precarious position near $20,000 ahead of fresh macro volatility.

The largest cryptocurrency is struggling to hold on to recently recovered levels after posting its biggest weekly gain since March.

The main resistance area remains above and inflation data will be released later this week, which may unsettle all risk assets in the coming days.

Meanwhile, crypto market sentiment is showing signs of recovery, with on-chain indicators continuing to highlight where Bitcoin’s latest macro price bottom is.

With conflicting data everywhere, Cointelegraph took a closer look at potential market movers and shakers for the week ahead.

The 200-week moving average is a headache

At around $20,850, the weekly close on July 10 was hardly anything special for BTC/USD, but the pair still posted its best seven-day gain in months.

At the close of trading on Sunday, the price of Bitcoin was a full $1,600 higher than it was at the beginning of last week, achieving a level of progress not seen since March.

However, this success did not last long, and in the hours following the weekly close, the price turned negative. Data from Cointelegraph Markets Pro and TradingView show that BTC/USD has a target price of $20,400 as of the time of writing.

BTC/USD 1-hour candlestick chart (Bitstamp) Source: TradingView

Whether Bitcoin can hold onto its current levels could be key in determining market sentiment this summer, as relief in global stock markets would provide the cryptocurrency with an opportunity to erase some of the losses seen in recent months.

Commentators including trading suite Decentrader are therefore watching the weekly chart with interest.

Others were less enthusiastic, noting that BTC/USD remains below the important 200-week moving average (WMA) near $22,500 once again.

In previous bear markets, the 200 WMA acted as a general support level, with Bitcoin briefly hovering below it to enter a macro bottom. However, this time it seems to be different, with $22,500 not appearing on the charts for a month.

Meanwhile, popular trader TechDev advocates a more optimistic outlook for the rest of 2022.

He said over the weekend that reclaiming more significant WMAs should lead to Bitcoin definitively ending its “re-accumulation phase” by the end of the year.

“Bitcoin rally to 32-35K could confirm re-accumulation and the end of this year’s correction,” TechDev told Twitter followers.

In my opinion, this is most likely to happen when both the 100-week and 50-week EMAs are within this range. The 100-week EMA is currently at 34.8K and the 50-week EMA is at 37.2K.

Elsewhere, ongoing asset liquidations at troubled crypto lending platform Celsius added to selling pressure.

Dollar returns to strength as Asian markets fall

On July 11, Asian stock markets showed a downward trend.

As of press time, the Shanghai Composite Index fell 1.5% and Hong Kong's Hang Seng Index fell 3.1%.

European stocks fared slightly better, with the FTSE 100 and Germany's DAX posting slight gains, while U.S. markets have yet to open.

However, ahead of the return of U.S. stocks, the U.S. dollar index (DXY) was already moving sharply higher, offsetting the pullback seen so far last week.

On July 11, the U.S. dollar index was at 107.4, just 0.4 points lower than the 20-year high set a few days ago.

Analyzing the situation, an analyst at trading firm The Rock said the dollar index is "almost as extreme" as it gets in terms of growth so far this year.

“Based on the extreme gains so far this year, the U.S. dollar index is now up 16% year-over-year,” he wrote.

This is about as extreme as it gets historically, and unfortunately, it typically occurs during times of significant financial stress in the market, an economic recession, or both.

Last week, Bitcoin managed to break its traditional negative correlation with the U.S. Dollar Index and rose in tandem with the U.S. Dollar Index.

US Dollar Index (DXY) 1-day candlestick chart Source: TradingView

Inflation set to bring 'chaotic week'

If that weren’t enough, the age-old topic of inflation could further test the market’s resilience this week.

The U.S. Consumer Price Index (CPI) for June will be released on July 13 and is expected to be higher than the same period last year.

The higher inflation gets, the more it deviates from those already high expectations, and the more risk assets tend to respond in anticipation of policymakers’ reactions.

Macro analyst Alex Krueger believes the likely move this week is clear.

“It’s going to be chaotic,” he concluded on Twitter.

Outpacing many leading inflation indicators, the CPI caught the attention of even mainstream commentators over the weekend, a grim sign that this week’s data could prove messy.

Economist Mohamed El-Erian responded: “With US CPI inflation data likely to come in very close to 9% next week, some will be quick to point out that this is a lagging measure.”

Yes…but it captures the pain that many people are feeling, especially the less fortunate in society; and feeds into inflation expectations.

At the same time, any knee-jerk reaction could cause panic in the Bitcoin market, as it has for other risk assets, or at least trigger significant volatility, as seen in previous CPI events.

MACD suggests a price bottom is forming

With multiple Bitcoin price indicators either showing a “bottom” or even hitting all-time lows, there are quite a few signals that investing in Bitcoin at current prices offers a risk/reward ratio that is historically unmatched.

This week, the latest indicator to be added is the MACD on the weekly chart.

The MACD effectively tracks a chart trend that is already in progress. It subtracts the 26-day exponential moving average (EMA) from the 12-day EMA.

Bitcoin tends to bottom when the resulting value is below zero, which means that if history repeats itself, the recent trip to $17,600 could also do the same.

Commentator Matthew Hyland also pointed out that a similar MACD structure is still playing out on the 3-day chart.

"The three-day MACD remains in a bullish crossover," added market analyst Kevin Svenson.

Despite the pullback, I remain bullish on the medium-term outlook.

Cointelegraph reported that Bitcoin’s relative strength index (RSI) has reached its most “oversold” level in history.

Meanwhile, last week one trader cited July 15 as a key date for another chart feature indicating a bottom, made up of two separate moving averages.

Crypto Fear and Greed Index Hits Two-Month High

There is a glimmer of hope, however, with the latest data showing that confidence is slowly regaining among regular cryptocurrency investors.

On a previous basis, crypto market sentiment hit its highest level since early May over the weekend and is currently at 22/100.

While still in “Extreme Fear” territory, the Crypto Fear & Greed Index’s resurgence stands in stark contrast to the events of the past two months, where the index fell as low as 8/100, below even some previous bear market bottoms.

Cryptocurrency Fear and Greed Index (screenshot) Source: Alternative.me